GRESB GLOBAL ESG COVERAGE

GLOBAL

The industry has taken great strides in recent years to increase ESG data coverage at the portfolio level, and underscore this with improved reporting at the asset level. In 2019, 89% of entities reported their environmental performance data at the asset level. This represents more than 66,000 assets of the total 100,000 assets covered by the benchmark.

The 2019 global average GRESB Score increased to 72, up from 68 in 2018. Listed entities still outperform their private counterparts, but the gap has narrowed significantly.

Average GRESB Score – Listed entities: 73 (2018: 69)

Average GRESB Score – Private entities: 72 (2018: 67)

The regional breakdown of GRESB Scores shows Oceania (80.9) continuing to lead the world. The Scores for Europe (70.7), Americas (72.1) and Asia (72.7) have clustered, showing only small differences in performance.

Competition is highest among GRESB 4 Star entities, where a GRESB Score difference of only 6.4 points separates the highest from the lowest-performing entity. By comparison, GRESB 1 Star entities have a 59.2 point differential and an average score of 58 (56 in 2018). The GRESB 1 Star cohort is comprised of a relatively large group of first-time participants, many of whom are using the 2019 reporting period to familiarize themselves with the GRESB Assessment and identify future priorities.

Top Limit

Bottom Limit

(Difference)

Average Score

Average IM

Average MP

5* Rated Entities

98.2

85.2

13.1

89.7

88.4

93.3

4* Rated Entities

85.2

78.8

6.4

82.0

80.0

87.7

3* Rated Entities

78.8

70.7

8.1

75.0

72.5

82.1

2* Rated Entities

70.6

61.3

9.3

66.3

52.0

78.5

1* Rated Entities

61.2

2.1

59.2

47.1

44.1

56.6

86% of GRESB Real Estate participants received the “Green Star” status, an increase from 78% in 2018. This means they obtained a GRESB Score higher than 50 on both dimensions (Implementation & Measurement and Management & Policy), signaling an integrated approach on ESG issues.

GRESB is connecting companies and funds at the beginning of their sustainability journey with a community of leaders, helping them to close the performance gap. First-time participants enter the benchmark with an all-time high score: 58. The average GRESB Score of the 42 entities who have been consistently reporting for 10 years is 84 (80 in 2018).

Diversified

Retail

Office

Industrial

Residential

Hotels

Healthcare

Other

Diversified - Office/Retail

Diversified - Office/Industrial

Diversified - Office/Residential

Storage

% 5*

10%

29%

33%

13%

15%

12%

13%

35%

17%

15%

14%

0%

% 4*

17%

24%

21%

19%

22%

12%

25%

6%

26%

12%

7%

17%

% 3*

24%

15%

17%

21%

18%

35%

13%

29%

19%

21%

31%

0%

% 2*

31%

14%

15%

15%

16%

24%

6%

12%

21%

21%

34%

0%

% 1*

17%

18%

13%

31%

30%

18%

44%

18%

17%

30%

14%

83%

DEFINING SDG MATErIality

There is an emerging recognition among GRESB Investor Members that the UN Sustainable Development Goals (SDGs) provide a useful reference point for both guiding the intent and measuring the impact of their investments. We have defined SDG materiality for real assets which provides the foundation for our work with our governance groups to agree upon a standardized set of metrics to track the contribution of real estate and infrastructure investment towards achieving the goals.

GRESB performed the mapping exercise with a top-down approach, first beginning with the alignment to the goal, then to the target, and lastly to the indicator. The alignment was ranked on a 0-3 scale (0- “Not aligned”; 3 – “Aligned”)

In addition to the alignment mapping, we analyzed which SDGs are the most frequently addressed in public reporting by GRESB participants. The highlighted SDGs in the image are the most material to the real estate sector.

Sustainability Aspects

The GRESB Assessment is structured into seven unique sustainability Aspects, together with a separate Aspect for New Construction & Major Renovations. The 2019 data shows notable year-on-year improvements in all Aspects with the exception of Management, which remains unchanged. A selection of insights per Aspect is shown below.

Over 90% of GRESB participants now have multiple ESG objectives that are fully integrated into their business strategy. The majority have established management structures to support execution on these ESG objectives:

73% have a dedicated employee for whom sustainability is the core responsibility (2018: 69%)

97% have an employee for whom sustainability is among their responsibilities (2018: 96%)

In 2019, the majority of GRESB participants use external consultants (79%), compared to less than 30% in 2012. Organizations typically engage a third-party for specialized services, such as data management.

This data is also increasingly being tracked using external data management systems. 74% of participants used an external data management system, often provided by one of GRESB’s Data Partners.

98% of 2019 participants have a sustainability task force in place. Notably, 62% of the task forces include a representative from the Board of Directors.

88% of participants have annual performance targets for employees related to ESG, but only 45% provided sufficient evidence to validate this claim. 41% have members of the Board of Directors with financially-linked ESG performance targets, while 30% have similarly structured targets for members of the senior management team.

SDG 5 focuses on women’s full and effective participation and equal opportunities for leadership at all levels of decision making.

Participants are increasingly monitoring the diversity of governance bodies and employees, with 91% doing so in the 2019 Assessment. Gender ratio is the most commonly tracked diversity metric across all regions, with 77% of participants reporting.

ESG reporting in annual reports increased from 63% of participants in 2017 to 69% in 2019.

88% have a dedicated ESG section on their corporate website.

The 2019 results find larger numbers of participants making public commitments to a broader number of ESG leadership standards or groups:

The United Nations-supported Principles for Responsible Investment (PRI) continues to be the most widely adopted ESG leadership framework.

The recommendations by the Task Force on Climate-related Financial Disclosures (TCFD) have seen rapid market adoption since their release in 2016. In 2018, 179 entities reported a public commitment to support the TCFD. The 2019 GRESB results show that 38% of GRESB participants (i.e. 363 entities managed by 130 organizations) are now publicly supporting the TCFD. Out of these 130 organizations, 73 are listed companies.

Many GRESB participants are active in Better Buildings Partnerships (BBPs). BBPs operate globally, working with cities to improve building-related resilience and energy efficiency.

SDG 8 encourages organizations to take immediate and effective measures to eradicate child and forced labor, and end modern slavery and human trafficking.

GRESB participants have increasingly adopted child and forced labor policies over the past three years. As shown in the chart, these topics are also increasingly included in organizational risk assessments. This trend aligns with policies implemented by the UK and Australian Governments mandating companies to disclose steps taken to combat Modern Slavery.

SDG 9 intents to upgrade and retrofit infrastructure and industries to make these sustainable by 2030. SDG 7 aims to ensure access to affordable, reliable, sustainable and modern energy for all.

The GRESB universe is contributing to SDG9 by implementing efficiency measures, which in turn impact energy, water, waste and carbon emissions.

94% of entities have implemented energy efficiency measures during the last four years. Beyond the typical retrofit of lighting systems to LED or upgrades to HVAC systems, what sets entities apart are some of the more innovative actions that have been taken:

The increasing numbers of electric vehicles, especially in Europe, creates a growing demand for EV charging stations. GRESB participants are responding by installing EV charging stations at their properties, with some participants even creating a brand around their EV infrastructure.

The increased use of natural daylight by way of skylight installations is leading to higher energy efficiencies. Solar reflective film on building windows and air curtains in doorways are frequently reported by GRESB participants. Some participants operate night walks to identify lights that have been left on inadvertently.

Regarding water efficiency, 87% of entities have implemented measures to decrease water use at the asset-level. The most common actions taken by participants include the installation of efficient fixtures with occupancy sensors, xeriscaping and drip irrigation. Retrofitting older toilets to reduce water consumption is frequently reported which, in turn, generates less waste because the toilets are reused. Some of the more innovative measures reported include leak detection systems (with some participants using QR codes to report leaks), pay-to-use toilets and rainfall gauges to reduce water consumption for landscaping purposes.

Waste efficiency measures have been implemented by 86% of entities during the last four years. Beyond the standard increase in recycling programs, waste signage, and on-site composting, some entities have begun to use more innovative measures to increase the proportion of waste diverted from landfills. Bin right-sizing, which reduces the overall number of trips made by hauler services, has seen an increase, as well as e-waste recycling programs that remove hazardous materials used in electronics from being added to landfills.

Participants have also introduced coffee-cup recycling programs to prevent single-use cups that are typically not recyclable from making it to the landfill. Water refill stations have been consistently introduced in assets which decreases the demand for single-use water bottles. In addition, in some entities, even something as small as cigarette waste now has a recycling program.

The charts shows the main methods used by participants to monitor energy and water consumption data, as reported over the years 2017-2019. The different methods have an impact on the timeliness and reliability of the collected data.

Smart meters provide almost instantaneous meter readings, require no manual intervention and can lead to significant savings. That’s why more entities choose this method today – 44% used Automatic Meter Readings (AMR) to track energy consumption in 2019, up from 39% in 2017. For water consumption, 24% of entities reported AMR data in 2017, which increased to 27% in 2019. These positive signals suggest that the real estate industry sees the need for reliable utility data and is willing to invest in technology that facilitates access to it.

Alternative methods, which are typically less reliable and more prone to error, include engagement with utility providers or tenants. Access to tenant consumption data remains one of the biggest challenges in the real estate industry. In many markets, tenants have no legal obligation to share this data with their landlords. As a result, in many instances, the sharing of tenant consumption data is agreed via specific clauses included in lease contracts (commonly known as “green leases”).

In order for investors to fully understand the environmental impact of their real estate investment, managers need to report on the whole building, including common areas and tenant space. The GRESB results show that full data coverage for environmental performance indicators remains a challenge for participants.

The chart shows the distribution of energy data coverage (in %) from 2015. The yearly averages – shown in the color-coded boxes on the middle-left -show that participants have steadily improved their data coverage over the last four years. In 2019, the average coverage is 68.4%, an increase of 8.9 percentage points compared to 2015.

The progressive curves on the chart provide a more granular perspective. At the bottom left, the curves track participants with zero data coverage over the years. This share has decreased from 12.8% in 2015 to 3.4% in 2019. In contrast, the share of participants with 100% portfolio data coverage has remained stable since 2015, indicating that overall improvement primarily comes from managers with low initial data coverage.

After three years of consecutive reductions, global like-for-like energy consumption increased by 0.20%.

Global GHG emissions fell by 2.66%, a lower rate than the 4.91% reduction in the previous year. This slower reduction rate will not be enough to meet the 1.5-degree target set out by the Paris Climate Agreement.

Water consumption is down slightly in 2019 (0.12%).

Water intensities coming soon

The past six years have been transformational for ESG data quality in the real estate industry. While submitting ESG data for third-party review was still limited in 2014, it is now considered to be common practice when it comes to energy and water data. In 2019, only 15% of reported energy data and 23% of water data is not externally reviewed, a notable improvement in just six years.

Of the three levels of third-party reviews, only external verification and assurance are required to be carried out in line with globally recognized standards.

In 2019, only 38% of energy data and 29% of water data was subject to third-party review in line with a recognized verification/assurance standard, which suggests significant potential for improving the overall data quality within the global real estate sector.

The most widely adopted standards are ISO 14064-3, ISAE 3000 and AA1000AS. Interestingly, whilst ISO 14064-3 was initially created to set principles for verifying GHG data, its requirements for selecting validators, determining the approach, and preparing validation statements widely serves as guidance when it comes to reviewing water usage data. ISAE 3000 is generally applied for sustainability audits of non-financial information, thereby requiring the involvement of accredited auditors. AA1000AS was set up as the first sustainability assurance standard and provides a platform to align the non-financial aspects of sustainability with financial reporting and assurance.

Any type of review or interaction with the data meant to filter out errors, identify outliers or identify unusual patterns, has added value to the final dataset. However, it is worth mentioning that among the three levels of third-party reviews (i.e. check, verification, assurance), only external verification and assurance are required to be carried out in line with globally recognized standards.

Most verification and assurance standards consist of quality guidelines underpinning the process of collecting and checking data through systematic, independent and documented process against predefined criteria. Such verification and assurance services can only be provided by accredited professionals, which also makes the provision of supporting evidence more straightforward compared to the other level.

The vast majority of participants that claim to assure their data can also support their statement through clear, standardized supporting evidence. The assurance process is well defined and understood in the industry, whereas data verification or data checks are often misinterpreted.

The most common reasons why supporting evidence for “Data verification” and “Data checks” was not accepted:

Referred to the wrong consumption type (e.g., documents demonstrating the external check of water data uploaded in the energy section)

Did not include any mention of the data verification standard used

Did not include a third party statement (i.e., the involvement of a third party is not evidenced)

Were not specific to the reporting entity (i.e., generic descriptions of data verification)

Were not specific to the reporting period (i.e., documents referring to reporting year 2017, 2016, or older)

Insufficient or inadequate translation of documents provided in languages other than English

SDG Target 7.3 aspires to double the energy efficiency improvement rate of the global economy by 2030. In order to meet this target, energy efficiency will need to improve with a 2.6% annual rate between 2010 and 2030.

The chart shows actual like-for-like energy consumption by GRESB participants falling behind the SDG target for the first time since 2010. In addition, the aggregated energy efficiency targets for 2019-2030 are not ambitious enough to meet the SDG Target 7.3. On a more positive point, more GRESB participants have set energy efficiency improvement targets: 79% in 2019 compared to 71% last year.

We see a great opportunity for the real estate sector to leverage these transparency efforts and take bolder actions to improve energy efficiency profiles ensuring alignment with national and global goals.

In April 2019, New York City introduced an ambitious law to curb GHG emissions of real estate properties larger than 25,000 sq ft, requiring them to cut emissions by at least 40% by 2030 and 80% by 2050.

What makes this law unique is that it sets GHG intensity targets for individual occupancy types in the future as well as an associated penalty (USD 268 per tCO2 emitted) if buildings emit more than their allotted amount. The law puts in place property-specific intensity targets for the periods 2024 through 2029 and 2030 through 2034. In this way it enables property investors to model their future carbon costs in a “do nothing” scenario.

Methodology: GRESB has modeled estimated targets from 2034 onwards , needed to achieve an average target of 0.0014 tCO2 e/sf/yr by 2050. To understand how many assets face a “stranding risk”, GRESB property types can be matched against the NYC Occupancy types for which emission targets have been set. Next, carbon intensities for NYC buildings in the 2019 GRESB Asset Database with 100% energy consumption data coverage were calculated using the GHG coefficient numbers predefined in the law. As GRESB only collects aggregated information on fuels and district heating and cooling, GRESB reported fuels were multiplied by the natural gas emissions factor (in terms of kWh), and district heating & cooling consumption values were multiplied by the district heating emission factor, which could lead to a slight underestimation of carbon risk.

The chart shows that GRESB buildings with 100% energy consumption data coverage will likely face limited “stranding risk” in the first few years that the penalty is imposed (2024-2029). However, the number of assets not in compliance with the limit will increase substantially in later years.

As the NYC carbon reduction case study shows, property managers and owners who fail to decarbonize will face penalties if governments and regulators continue to enact on reducing impacts on climate change.

Penalties can either be direct (as in the case of NYC) or indirect through increased pricing of energy consumption. In Europe, many laws intended to improve the carbon profile of buildings set targets in the relative near term. For example, in the Netherlands, office buildings need to have a minimum energy label C by 2023 or they cannot be let out. Similarly, in the UK privately let buildings need a minimum EPC level of C since 2018 (pending exceptions, and a more stringent 2020 deadline).

Against this background, the logical next step is to calculate long term climate transition risks faced by real estate portfolios by developing a climate science-based model based on alignment with the Paris Climate Agreement. The EU-funded Carbon Risk Real Estate Monitor (CRREM) is developing a property type-specific model based on this approach for the European commercial real estate sector. In its first public report, CRREM states that the sector will need to decarbonize by 91% by 2050 in order to align with the 1.5-degree Scenario.

By applying the CRREM model to GRESB participants who have reported asset data, we have projected the transition risk inherent within participating European commercial real estate portfolios with 100% energy consumption data coverage. The preliminary results, based on reported carbon data show a gradual increase in stranding risk over time. By 2030, 29.67% % of Office, Retail, Hotel and Healthcare portfolios will be stranded, which will rise to 74.22% % by 2050. A further analysis is underway that takes into account grid decarbonization.

More results will be available later in 2019

While the use of certification schemes is becoming more common, the fraction of total portfolio floor area covered by certificates is still low. Only 8.8% of the total floor area represented by the +100,000 assets covered in the 2019 GRESB benchmark is certified at the time of construction and 15.8% when operational.

The most widely used certification scheme is LEED, followed by BREEAM and Green Star. In certain markets and for certain property types, local certifications are used more frequently.

CASBEE, DBJ and BCA Green Mark dominate the Asian market in most property sectors, while BREEAM, HQE and DGNB are preferred in Europe. BOMA’s high levels of adoption in American Industrial places the certification in the leading position for the Industrial sector globally.

Over the past years, topic-specific certification schemes have emerged, most notably focused on health and well-being. WELL (administered by the International Well Being Institute, “IWBI”) and Fitwel (administered by the Center for Active Design) have been raising awareness of how buildings can improve the well-being of occupants. Nevertheless, the number of certified buildings remains low: only 39 certified projects are covered by the 2019 GRESB benchmark.

SDG 8 encourages to protect labor rights and promote safe and secure working environments for all workers

Safety training and monitoring on the rise

In line with SDG 8, the GRESB universe has consistently improved in providing safety training on social issues. Employee safety training increased by 12%, customer/tenant safety training by 10% and community safety training by 8%.

Regionally, Oceania leads with 86% of entities providing training on safety issues. Europe lags Oceania by around 20 percentage points for both community safety and customer/tenant safety training.

95% of participants monitor at least one metric related to employee safety. Once again, Oceania leads with 99% of entities monitoring employee safety compared to 88% in the Americas.

Of the 82% of entities who administer work-station and/or workplace checks in 2019, an average of 89% of employees are covered, which contributes to a healthier and safer individual working environment. 71% of Asian entities have work-station checks compared to 90% of European entities.

Absentee rates have the largest regional discrepancy of any monitoring method with 87% of entities in Oceania tracking the metric compared to only 40% of entities from the Americas. 81% of Asian entities and 78% of European entities monitor absenteeism.

Monitoring injury rates increased notably year-on-year, with 53% of all entities tracking this, compared to only 40% in 2018. 68% of Asian entities monitor injury rates compared to 45% of European entities.

87% of entities have occupational safety requirements in procurement processes which supports increased safety throughout the supply chain. This is up from 68% in 2017.

Progress being made in community engagement and impact monitoring

79% of participants monitor impact on the community, an 8% increase over 2018. Local residents’ well-being is the most widely monitored area of impact with 57% of participants tracking this, up 6% from last year.

93% of participants have a community engagement program that includes sustainability-specific issues. Of these participants, 88% support charities and community groups, while 71% have community health and well-being programs, showing the largest year-on-year increase at 8%.

Results coming soon.

The New Construction & Major Renovations (NC&MR) Aspect of the GRESB Real Estate Assessment evaluates ESG management during the design, construction, and renovation of buildings.

In 2019, 420 entities representing 1.6 billion m2 provided information about the ESG performance of their development activities. This includes the 41 participants completing the GRESB Developer Assessment.

DEVELOPER ASSESSMENT

Globally, most new construction activity is seen in the Residential sector (347 million m2), particularly in Multi-family assets (217 million m2). This represents a 28% increase compared to 2018.

The property sector with most redevelopment activity is Retail, with a total of 174 million m2 reported to go under major renovation. These figures are mainly representative of a handful of large North American REITs with a focus on Shopping Centers.

While North American shopping malls are being renovated, more industrial assets are being built from the ground up. More specifically, 195 million m2 of industrial assets came online in 2018 in North America (or will become operational in the short term).

96% of GRESB participants with development activities have a sustainability strategy in place for their projects. These strategies mainly account for energy and water conservation measures and waste management. Supply chain and resilience strategies are still missing from the general approach of 35% of GRESB participants.

85% have sustainability criteria as part of their site selection process – brownfield redevelopment sites and sites with good connection to multi-modal transit networks are most common.

These practices are representative of a positive trend observed for the past years. In 2014, only 60% entities had waste management policies during the development stage, while in 2019, 91% promote on-site efficient waste management.

90% of participants align their projects with green building rating standards. In addition, 45% of participants with development projects require a specific level of certification for more than 75% of their projects under development.

For the 51% of GRESB participants that choose to design on-site renewable energy generation solutions in their development projects, solar remains the most widely used source (92% of participants)

Notably, 14% of participants with development activities design their projects in accordance with net-zero energy standards.

81% of participants assess the socio-economic impact of their development activities. More specifically, 61% of reporting entities measure local residents’ well-being, while 35% look at their impact on livability scores. Overall, the socio-economic impact of assets is being more intentionally addressed during the development phase compared to the operational phase.

HEALTH & WELL-BEING

As creators of the built environment, the real estate industry is well-positioned to address key health determinants in their approach to real estate development and management. Over the past few years, leading real estate companies have begun to view health and well-being as a new mechanism of competitive differentiation and an explicit area of potential risk reduction and value creation. Leading companies have structured their health and well-being programs to cover employees, tenants, communities and supply chains.

Overall, 11% more participants have programs in place to address health and well-being of employees as compared to tenants. These health and well-being programs are not yet uniform or standardized across entities. Leading participants have comprehensive programs informed by an intentional health promotion process including policy, needs assessment, action and monitoring for health and well-being. Lagging participants have disjointed, incomplete processes for health.

A more comprehensive analysis of results will be provided later in 2019.

Health Industry Partners

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The GRESB Health and Well-being Results were developed in collaboration with the Green Health Partnership, a research and development initiative of the University of Virginia School of Medicine and the U.S. Green Building Council supported by a grant from the Robert Wood Johnson Foundation.

Validation PROCESS and Data Quality Standard

An open and transparent data validation process is an important part of GRESB’s annual benchmarking process. GRESB operates a three-tier validation process (All Participant Check, Validation Plus, Validation Interview). Over the past years, the topics covered by the validation process and the scope of work for Validation Plus and Validation Interviews have increased significantly. The validation process is carried out by GBCI.

The documents uploaded as supporting evidence for the answers provided.

Automated outlier and consistency checks of performance data including energy and water consumption, GHG emissions and waste generation.

GRESB identifies reported consumption values as outliers if the corresponding consumption intensity (consumption/area) and/or its change over time is abnormal relative to all reported data for a particular property type.

Supporting evidence is evaluated on the validity of the document relative to the requirements stated in the guidance for the indicator, including the actual reference to selected answer options. In order to be accepted, the provided evidence should meet the requirements as stipulated in this Reference Guide.

22,345

Human Validated Decisions

1,982

Automated Outliers

27,056

Documents uploaded as supporting evidence

The outcomes of the 2019 Validation Plus process are presented below. 93% of the total 27,056 pieces of supporting evidence uploaded were accepted, following the predefined validation rules.

In cases where the supporting evidence is not accepted, the indicator is assigned a score of 0.

The most common reasons why supporting evidence was not accepted is because the document:

MA5: ESG factors included in performance targets

Refers to future ambitions to address ESG issues in employee performance targets (i.e. the answer does not reflect the reporting period)

Is an annual report or a sustainability report that identifies the organizational ESG targets, not linked to any group or subgroup of employees

Does not identify the ESG issues used to evaluate the annual employee performance, but presents an overview of social initiatives carried throughout the reporting period

Includes blanket statements that refer to “eligible employees” or “case by case basis” applicability

PD1: Policy on environmental issues

Does not refer to reporting period (e.g. they are dated in May 2019 and do not include information about previous versions)

Contains insufficient or inadequate translation of information provided in languages other than English

Is too generic to be able to confirm any of the issues selected from the pre-defined answers list

PD5.1: Disclosure of ESG performance

Annual report

Does not refer to reporting period (i.e. documents dated as far back as 2015)

Is not an annual report, but an ESG brochure, company statement or other type of document

Is a link to the dedicated section on company website, quarterly report or ESG reporting to investors (i.e. duplicate to other answer options)

Contains insufficient or inadequate translation of information provided in languages other than English

Sustainability report

Is not a standalone sustainability report, but a section in the annual report

Contains insufficient or inadequate translation of information provided in languages other than English

Does not reflect the applicability level identified (e.g. partial points are assigned to reports prepared at group level, when the identified reporting level is “entity”)

Integrated report

Does not include any reference to the IIRC framework, which defines integrated reporting

Contains insufficient or inadequate translation of information provided in languages other than English

Dedicated section on company website

Links are not accessible and cannot be identified in more than 3 clicks

Section in entity reporting to investors

Contains insufficient or inadequate translation of information provided in languages other than English

Does not refer to the reporting entity

Does not refer to reporting period

RO3.1: Due diligence on new acquisitions

Does not refer to reporting period (e.g. they are dated in May 2019 and do not include information about previous versions)

Contains insufficient or inadequate translation of information provided in languages other than English

Is too generic to be able to confirm any of the issues selected from the pre-defined answers list

Contains evidence for less than 20% selected issues from the pre-defined answers list

Contains insufficient or inadequate translation of information provided in languages other than English

SE4.1: ESG specific requirements in the procurement process

Is too generic to be able to confirm any of the issues selected from the pre-defined answers list

Contains insufficient or inadequate translation of information provided in languages other than English

Is a generic statement prepared by third party advisors that does not refer to the reporting entity

GRESB identifies reported consumption values as outliers, if the corresponding consumption intensity (consumption/area) and/or its change over time is abnormal relative to all reported data for the particular property type. Through an in-house developed statistical program, GRESB groups and benchmarks values within their property type, which allows for the identification of consumption values that fall outside normally observed ranges. Beyond reviewing the intensity of consumption, the like-for-like development of consumption over a two-year period is also used to identify abnormal data points.

Users who receive these outlier messages are alerted so as to engage an internal data review process to identify the cause of the very low consumption level prior to final submission. All participants are offered the opportunity to explain outliers; importantly, the GRESB systems are not designed to reject the submission, only to highlight the outlier for investigation by the participant so as to provide an explanation. GRESB outlier checks are meant to flag extremes — unusually low or high values as compared to independent market benchmarks, as well as to GRESB historic data. Our systems are specifically designed to draw participant attention to potential errors before final submission and require additional context where necessary. In this case, the explanation provided was not deemed sufficient to explain the values submitted.

As part of its ongoing commitment to data quality, GRESB initiated a Technical Working Group (TWG) in late 2018 with the goal of developing a GRESB ESG Data Quality Standard. As a first step towards the development of this standard, GRESB designed a Data Quality Survey together with the TWG. This optional, unscored survey was open to GRESB Data Partners and Participants in the Real Estate Assessment that use the GRESB Asset Portal during the normal GRESB reporting period, April to July 2019.

A primary aim of this survey is to work towards the development of the GRESB Data Quality Standard. An important secondary goal is research-oriented: to understand the current landscape of ESG data systems and investigate how to improve the overall quality and trustworthiness of ESG data in the future. This research will be used to inform the development of future versions of the survey and the standard.

13 Data Partners and 3 Real Estate Participants completed this year’s Data Quality Survey. Those 13 Data Partners supported about one third of Real Estate Assessment submissions in 2019. To recognize these respondents, a badge has been to the Benchmark Reports of the Real Estate Participants who completed the survey. A badge has also been added to the Benchmark Reports of Participants whose submission was supported by a Data Partner that completed the survey.

From the responses to this survey, it is clear that all of the participants take ESG data quality seriously. All of the responses describe measures in place to ensure that the ESG data in their systems is accurate, complete, timely, and traceable. The majority of data systems track multiple metrics of data quality, such as the number of missing meter readings vs. expected, or the expected value of a reading based on past readings. The majority of systems also automatically identify and flag missing or anomalous data, and then follow up with the data sources for clarification or rectification. Half of the data systems cross-validate their ESG data, by comparing, for example, automatic or manual meter readings against monthly or quarterly invoices.

Overall, the responses to this year’s survey indicate that GRESB Partners and Participants not only acknowledge the importance of data quality in ESG data, but also have robust, sophisticated methods in place to ensure that their ESG data reported to GRESB is of high quality.

GRESB Global Partners

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RESILIENCE AND TCFD HIGHLIGHTS

In 2018, GRESB launched the Resilience Module to provide investors and participating companies and funds with information about climate risk and resilience. The Resilience Module is a three-year effort that will ultimately lead to new indicators in the core GRESB Real Estate and Infrastructure Assessments. In 2019, the Resilience Module was revised to increase alignment with the recommendations from the Task Force on Climate-related Financial Disclosures (TCFD).

Participation in the voluntary Resilience Module increased by 96% to 316 entities in 2019, up from 150 entities in 2018. This increase also reflects a broader range of entity-types, including infrastructure funds and property developers.

The majority of participants report having dedicated leadership, systematic risk assessment, aligned business strategies, and at least some level of performance measurement.

However, reported actions vary significantly between entities. Some entities report comprehensive programs, while many have a more limited range of activities.

The responses also provide a snapshot of activity with respect to TCFD recommendations. The top quartile of entities report action in each of the top-level TCFD categories, while the trailing quartile report action in only one or two categories. Again, this illustrates significant variance in the comprehensiveness of climate risk and resilience-related activities.

Responses to the 2019 Resilience Module provide initial insights about the state of the industry with respect to climate risk and resilience, including:

Engagement on climate risk and resilience is increasing rapidly among real asset investors, companies, and funds. Participation in the GRESB Resilience Module more than doubled since 2018.

Interest, expertise, and engagement on climate risk and resilience varies widely across the industry. Consequently, real asset investors can not assume that companies are taking action to understand or mitigate climate-related risks.

Approximately 25% of Resilience Module participants reported comprehensive programs with activities including governance, risk management, business strategy, and measurement.

The remaining 75% of participants reported highly variable programs, often lacking any activity in one or more of the core categories recommended by the TCFD.

Most entities report some level of climate-risk and resilience-related governance activities, while entities with comprehensive programs also report coordinated business strategies, targets, and performance metrics.

These observations show an industry in transition. There is a rapid increase in awareness about the relevance of climate risk and resilience. However, practices vary widely, and institutional investors will need to engage with their investments to understand management strategies and performance goals.

It is important to note critical limitations in available information. The new Resilience Module data provide clear, comparable indicators for the existence and breadth of climate-risk and resilience activities. However, it is not yet possible to robustly evaluate the quality of risk management activities, such as the assessment of relevant risks and direct connections to asset-level mitigation measures. This will be a focus of indicator development for 2020.

A more comprehensive analysis of results will be provided later in 2019.

PUBLIC DISCLOSURE

2019 is the third year GRESB has evaluated the ESG transparency levels of listed companies and REITs through GRESB Public Disclosure. In this year’s analysis – available to all GRESB Investor Members subscribed to listed real estate data – the scope of the universe was extended to also cover listed property companies and REITs active outside of developed markets.

GRESB Public Disclosure consists of 22 indicators that collectively contribute to a maximum of 70 points. Constituents are then assigned a GRESB Public Disclosure Level from A to E based upon the points they received. The complete 2019 guidance and scoring methodology is available here.

Media and Research Partner

In 2019, constituents received an average of 35 points out of 70. This is higher than in 2018, when the average number of points received was 33 out of 70. The points increased despite a slightly more stringent scoring methodology and the increased scope of the universe.

The average score conceals the strong disparity in the distribution of GRESB Public Disclosure Levels. REITs and listed property companies either disclose a significant amount on ESG, or fairly little, which is reflected in a high allocation of E and A scores at both ends of the scoring spectrum (25.9% and 25.2% respectively).

Similarly to last year, GRESB Real Estate Participants vastly outperformed listed property companies and REITs that did not participate in the 2019 Assessment. 61.5% of GRESB Participants disclosed at the highest A-level, in this year’s analysis, compared to 51.7% last year.

Asia

J-REITs scores only second to France in ESG transparency, receiving an average of 52.2 points out of 70. This is especially remarkable as 59 Japanese REITs were assessed, representing the highest sample, second to the United States.

Asia lags other regions when it comes to renewable energy consumption disclosures.

Europe

Regionally, Europe scores the highest in ESG transparency. European REITs and listed property companies received an average of 43.4 points out of 70.

The 13 French REITs and listed property companies that were assessed scored the highest globally, receiving an average of 61.5. This high score reflects Article 173 of the law on energy transition and green growth, introduced after COP21 in 2015, requiring listed companies to report their ESG performance.

Entity is an Overall Global Sector Leader (Achieved highest score for its sector)
Entity is a Global Sector Leader (Achieved highest score for the combination of nature of ownership and sector)
Entity is an Overall Regional Sector Leader (Achieved highest score for the combination of region and sector)
Entity is a Regional Sector Leader (Achieved highest score for the combination of nature of ownership, region and sector)

Property Type

Name

Residential - Listed

AvalonBay Communities, Inc.

Office - Private

CommonWealth Partners

Residential - Private

GS Chelsea Co-Investment, LP, Greystar Real Estate Partners

Industrial - Private

Institutional Logistics Partners managed by BentallGreenOak

Retail - Private

Ivanhoe Cambridge - managed portfolio

Diversified - Office/Residential - Private

J.P. Morgan U.S. Value Add, J.P. Morgan Asset Management

Office - Listed

Kilroy Realty Corporation

Diversified - Private

BentallGreenOak’s Diversified US Property Fund

Diversified - Office/Retail - Private

Oxford Properties Group (OMERS)

Industrial - Listed

Prologis

Retail - Listed

The Macerich Company

Entity is an Overall Global Sector Leader (Achieved highest score for its sector)
Entity is a Global Sector Leader (Achieved highest score for the combination of nature of ownership and sector)
Entity is an Overall Regional Sector Leader (Achieved highest score for the combination of region and sector)
Entity is a Regional Sector Leader (Achieved highest score for the combination of nature of ownership, region and sector)

Entity is an Overall Global Sector Leader (Achieved highest score for its sector)
Entity is a Global Sector Leader (Achieved highest score for the combination of nature of ownership and sector)
Entity is an Overall Regional Sector Leader (Achieved highest score for the combination of region and sector)
Entity is a Regional Sector Leader (Achieved highest score for the combination of nature of ownership, region and sector)

Entity is an Overall Global Sector Leader (Achieved highest score for its sector)
Entity is a Global Sector Leader (Achieved highest score for the combination of nature of ownership and sector)
Entity is an Overall Regional Sector Leader (Achieved highest score for the combination of region and sector)
Entity is a Regional Sector Leader (Achieved highest score for the combination of nature of ownership, region and sector)

Entity is an Overall Global Sector Leader (Achieved highest score for its sector)
Entity is a Global Sector Leader (Achieved highest score for the combination of nature of ownership and sector)
Entity is an Overall Regional Sector Leader (Achieved highest score for the combination of region and sector)
Entity is a Regional Sector Leader (Achieved highest score for the combination of nature of ownership, region and sector)

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